Africa’s fintech ecosystem in has grown by 60 per cent over the last two years and fintech firms on the continent have grown to 491 from the 301 recorded in 2017, earning US$132.8 million in 2018, making it the best year in the sector.
Given the high levels of mobile telephone penetration and the boom of mobile financial services and payment technologies in Africa, mobile technology growth has paved the way for the fintech revolution, with South Africa, Nigeria, and Kenya accounting for 65.2 per cent of Fintech startups in the continent.
Despite the growing interest of global investors in Africa’s fintech which is helping to fuel its growth on the continent, certain areas like financial inclusion, fintech service expansion and internet service bottlenecks still lag behind. The full potential of African fintech firms will not be reached until these issues are addressed. Here are some of the areas in which Africa fintech firms need to pick up the pace.
READ ALSO: Africa’s Fintech Needs an Elaborate Regulatory Framework to Thrive
The excitement about fintech driven financial inclusion in Africa is warranted, seeing how much grounds some African countries have been able to cover. Kenya’s M-Pesa has achieved a lot in this area – a survey by the central bank and FSD Kenya shows that 41 per cent of the population had bank accounts owing to the availability of mobile services. Another country doing great in this area is South Africa, as results from the 2016 Finscope survey indicates an 89 per cent financial inclusion in the country.
However, in several African countries fintech firms have not been able to achieve the level of financial inclusion needed to effectively drive country-wide financial development. A major cause of this challenge lies in Africa’s fintech firms who are unwittingly leaving out a good portion of the unbanked in the continent, due to the reliance on traditional banks for credit histories, bank accounts, and identity verifications. As a result, individuals who do not have a traditional bank account are unlikely to gain financial access to fintech innovation.
This challenge points to poor infrastructure for credit check automation. In Nigeria, for instance, 60 per cent of the population is unbanked, this was revealed by the National Deposit Commission (NDIC). The cause of this issue becomes visible when you consider a report by Enhancing Financial Innovation Access (EFinA) that shows that 90 per cent of mobile money customers already have an account with commercial banks.
To read the rest of this article and other insightful exclusives like this, click here to subscribe to our magazine.